No. 1, 2006

Alexander Makarov ,
Maria Podolskaya


LUKOIL-Nizhegorodnefteorgsintez measures up to the high demands of the fuel market

The business segment Refining and Marketing of JSC LUKOIL includes the assets providing efficient crude oil logistics and marketing, refining and petroleum products marketing such as 7 refineries, 3 petrochemical complexes, 24 regional marketing companies and 4 specialized marketing companies. JSC LUKOIL-Nizhegorodnefterorgsintez has by right an important part in it.

An eventful half-century

In the early 1950s, right in the heart of Russia, on one of the Volga's tributaries south of the city of Nizhny Novgorod (then named Gorky), there began the construction of what was Russia's and Europe's largest refinery with a design capacity of 24 million tons of crude oil a year. In December 1957 the construction project was given an all-Union top-priority rating, and as early as on August 23, 1958, the refinery dispatched its first trainload of finished products. Right from the start, the enterprise was oriented toward handling oil from the fields of Tatarstan.

During the first ten years, 32 technological units were constructed at the refinery, turning out 22 types of products. The country's key industrial sectors received motor fuel and lubricants produced at the Novogorkovsky Refinery. Year after year the enterprise increased its output, new fuel-refining processes were introduced, and the petrochemical complex was being developed. It was then that Nizhny Novgorod recovered its fame of being Russia's purse. This was largely owing to the city's strategic geographical location and the enormous industrial potential of the Region, as well as the operation of the Novogorkovsky Refinery, the pride of the national refining industry.

At the end of the 20th century, a time of major socio-economic changes in Russia, the new economic policy brought the fuel and energy industry to a crisis. The old management of the refinery was unable to find any new methods of work under the conditions of a market economic system. The result was there to see: in 1995 the utilization ratio of primary refining at the enterprise was about 45% of the design capacity. To find a way out of the crisis certain organizational measures were taken, and in September 1995 NORSI-Oil was set up a company which absorbed the problem enterprise. However, while it had an enormous capacity for refining, the company had no oil-producing enterprises of its own. And so it was doomed to a day-by-day struggle for survival, which lasted for seven years and resulted in multimillion debts. In 1997, the company fought desperately for its survival. At that time the refinery processed less than 5,000 tons of oil a day, less than 150,000 tons a month, and less than two million tons a year. We almost brought in oil by the bucket, Viktor Rassadin, the present general director of the enterprise, recalls, and we counted every ton of it.

Let's work with an eye to the future was the new slogan, which led to resolute measures being taken to modernize the existing production facilities in order to raise the efficiency of production, to enforce observance of safety rules, to reduce power consumption and to resolve environmental protection problems.

The manager of a new type, a man of encyclopedic knowledge and great learning, energetic and firm of purpose, V. Rassadin headed the company in 1997 and united the team under his command of analytical and creative persons.

The beginning of the 21st century marked the advent of a new epoch in the history of the enterprise and of the entire region: the Nizhny Novgorod refinery became part of Russia's largest oil company, LUKOIL. On October 19, 2001, at an auction, this company acquired from the state 85.36% of the NORSI-Oil stock. The deal was worth $26 million. At the time of the auction the debts of NORSI-Oil totaled three billion rubles. Furthermore, LUKOIL had owned approximately 6% of the stock before the auction, and after it the Company bought a further 8.41% from Sibneft (earlier this block of shares belonged to Tatneft).

After it became part of the LUKOIL Group, the Nizhny Novgorod refinery was given a new name LUKOIL-Nizhegorodnefteorgsintez Positive changes in the state of affairs of the refinery occurred in the very first few months. Its main problem the delivery of raw material for processing was taken care of. Now supplies of petroleum were guaranteed by one of Russia's biggest oil-producing companies. Its raw material problem having been resolved, the enterprise began to recover quickly financially. In 2001 the Kstovo refinery processed 6.73 million tons of crude oil, the depth of refining reaching 61.7%. The total volume of oil supplies for the year 2002 was set at 10 million tons. Our purpose is to turn LUKOIL-Nizhegorodnefteorgsintez into a leading enterprise of the Russian petroleum industry, Vagit Alekperov, President of JSC LUKOIL, declared then. And he summed up: LUKOIL has come to the Nizhny Novgorod Region as a big investor and a reliable partner.

The personnel of the refinery welcomed the news that their enterprise was now owned by the leader of the Russian oil industry. To them it meant that the refinery had survived, that it had got up on its feet and faced new development prospects. In the words of Anatoly Skibenko, a veteran worker with a service record of nearly 50 years (he came to Kstovo back in 1957, saw the first trainload of finished products leave the refinery, held the post of chief production engineer for a long time, has recently passed this post on to one of his pupils and continues working as his deputy), With the coming of LUKOIL, the refinery's personnel has, to use a phrase borrowed from sports, got its second wind people began working with a festive and joyful feeling.

Doing their job well

Today, LUKOIL-Nizhegorodnefteorgsintez is one of the leading refining enterprises in Russia. It is a major producer and supplier of high-quality motor fuel, lubricants and hydrocarbons for petrochemical synthesis. The installed capacity of the enterprise is 15 million tons of petroleum products a year. The processing is done according to the fuel-lubricant scheme. The technological processes used make it possible to turn out commodity petroleum products which are highly competitive on the world market. It is motor fuel above all else: non-ethylated motor gasoline of the AI-80, AI-92, AI-95 and AI-98 brands, jet fuel and summer and winter grades of diesel fuel. Started in 2005 was the industrial production of Euro-4 diesel fuel with a sulfur content of up to 0.005% in keeping with the EN-590 European standard.

LUKOIL is the only Russian oil company today, which produces Jet A-1 aviation fuel in conformity with the standards of the International Air Transport Association (IATA). In April 2004, for the first time in the practice of the Russian oil companies and civil aviation airfield services, an aircraft of the Lufthansa airline was filled with Jet A-1 fuel produced by LUKOIL-Nizhegorodnefteorgsintez. The refinery has been granted a certificate, which confirms its right to turn out this type of product in conformity with international standards, and now German aircraft fill up with LUKOIL's Jet A-1 fuel regularly at Strigino Airport in Nizhny Novgorod.

It should be noted that LUKOIL-Nizhegorodnefteorgsintez is one of the biggest and better-known producers of lubricating oil. It turns out a wide range of lubricants practically for every occasion: motor and transmission lubricating oil for the gasoline and diesel engines of passenger cars, trucks, ships and diesel locomotives, as well as turbine, industrial and special lubricants.

Mastered in recent years has been the production of high-quality motor and transmission oil meeting the requirements of all viscosity groups (LUKOIL-Standart), as well as the production of the LUKOIL-Super lubricants on a mineral and semi-synthetic base, the LUKOIL-TM-5 transmission oil with a solidification temperature of minus 40 degrees centigrade intended for use in the country's northern latitudes. The LUKOIL-Super motor oil is officially allowed to be used in the automobiles of the Mercedes make.

A radical modernization of the complex producing hard oil paraffin has made it possible to increase its capacity and to improve the quality of the P-1 and P-2 grades of FDA food paraffin to meet the international requirements of the FDA. The bulk of food paraffin, in liquid or packaged form, is exported to Europe. The enterprise pays particular attention to bitumen production. Produced there are road, roof and other types of construction petroleum bitumen as well as bituminous-rubber cement and electric-cable compound.

The fundamental modernization of the commodity and raw material production accords with the tasks, set by JSC LUKOIL, of developing the transport system, storing and shipping by rail oil and petroleum products to be then exported via marine terminals first and foremost, via the Vysotsk distributing and transshipment complex in the Leningrad Region.

New reference points

Four years have passed since the enterprise joined LUKOIL's big and happy family. These years were marked by the steady, productive activity of the Nizhny Novgorod refinery workers and by a substantial improvement of all the key technical and economic indicators.

The World Refining Association has recognized LUKOIL-Nizhegorodnefteorgsintez as the leader in the sphere of economic activity, investment policy and the quality of management among the enterprises of Russia and other CIS countries. It was also one of the prize-winners of the Business Leaders in the Volga Area contest. Every year the joint-stock company LUKOIL-Nizhegorodnefteorgsintez is granted the honest taxpayer certificate, and three times it was awarded the Standard of the Governor of the Nizhny Novgorod Region.

An important achievement of the collective of the enterprise was the construction of a gasoline catalytic-reforming complex featuring continuous regeneration of the LF-35/21-1000 catalyzer with a capacity of one million tons a year.

Speaking at a meeting devoted to the commissioning of the complex, LUKOIL President Vagit Alekperov noted that the introduction and mastering of the latest technological refining processes was of great importance. He added that this was practical implementation of the Company's investment program.

The enterprise has a definite and distinct development program for the next few years which has been compiled with due account of the master plan devised by the Fluor Daniel company and the feasibility study prepared by Foster Willer, as well as the Exxon Mobil corporation's concept of lubricants and paraffin production.

Proceeding apace at the enterprise is the building of a deep refining complex with a capacity of processing two million tons of raw material a year. This is a key project which will be put into operation under an investment program of the enterprise in 2009. The commissioning of the complex will double the output of motor gasoline, mostly of the Euro-4 grade.

A social security program has been devised and is being implemented at the enterprise. Its aim is to create optimal conditions of work, the training of young workers, and the provision of rest, medical services and retirement benefits to the personnel, and social protection to veteran workers.

The long-term prospects of technical development, stability of employment and confidence in the morrow, as well as the high technical and manpower potential, provide every opportunity to LUKOIL-Nizhegorodnefteorgsintez for dynamic development to the benefit of LUKOIL and all of Russia.

As LUKOIL President Vagit Alekperov has stressed in one of his speeches, LUKOIL-Nizhegorodnefteorgsintez is an important part of the Company's vertical structure, which makes it possible to increase the refining output and to take up an optimal position on the Russian market of petroleum products.

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Oil of Russia, No. 1, 2006
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